German energy giant E.ON records biggest annual loss in company history

The coal power plant 'Scholven' of German utility giant E.ON is seen in Gelsenkirchen, Germany (Reuters / Ina Fassbender) / Reuters

Germany’s biggest power supplier, E.ON, saw its worst annual net loss of €3.2 billion in 2014. Profits were wiped out by the company’s transition to renewables, as well as low oil prices and volatile currencies.

“The earnings situation reflects the persistently difficult
situation on energy markets in Germany and Europe,” E.ON
said in its 2014 Annual Report, published Wednesday.

By comparison in 2013 the company recorded a €2.14 billion
profit.

In December, E.ON announced it will split into two companies –
one focused on renewables and the other on fossil fuels. The
company said in December it expected the spin-off, which required
divesting several power generation assets in Europe, would cost
the company $4.5 billion and lead to an overall loss in 2014.

Despite very heavy subsidies #greenenergy
never delivered on its promises: Very expensive & much more
maintenance than promised. #EON

Germany’s energy sector has been in disarray since 2011, when the
government, in the wake of the Fukushima disaster, banned nuclear
power, which up until that point provided 50 percent of the
country’s power.

The company said low oil prices and volatile currency exchange
rates, especially in Russia and Sweden, took a large chunk out of
earnings, which were €8.3bn before interest, tax, depreciation
and amortization. In 2015, the company expects EBITDA of €7-7.6
billion.

The depreciation of the ruble has hit the company, which has its
biggest production asset in Russia. E.ON chief Johannes Teyssen
said the company gets about 6 percent of operating profit from
Russia is concerned about the situation in Ukraine and its effect
on the Russian economy and ruble.

“Significant movements in the rates of some currencies,
declining oil prices, and continued low interest rates in Europe
are having an adverse impact on some components of our
earnings…and no one can say with certainty how long these trends
will last,” Teyssen said.

Dwindling production has affected the group’s gas fields in the
UK North Sea, Russia, Algeria, and Norway.

"It's also true that extremely low oil prices, adverse
changes in currency rates, and a further decline in power prices
are having a significant effect on our business,” the
company said.

This is the biggest loss the group has experienced since it was
founded in 2000 when energy utilities VEBA and VIAG merged.

Rivals RWE and GDF have produced similarly negative outlooks on
their company’s profits and investments in the coming year.